(b) Explain how the act of lending creates deposits. That is, explain Figure 1 with details

(a) Balance sheets are highly stylised for ease of exposition the quantities of each type of money shown do not correspond to the quantities actually held on each sector's balance sheet. b) Central bank balance sheet only shows base money liabilities and the corresponding assets. In practice the central bank holds other non-money liabilities. Its non-monetary assets are mostly made up of government debt. Although that government debt is actually held by the Bank of England Asset Purchase Facility, so does not appear directly on the balance sheet. (c) Commercial banks' balance sheets only show money assets and liabilities before any loans are made. (d) Consumers represent the Private sector of households and companies. Balance sheet only shows broad money assets and corresponding liabilities - real assets such as the house being transacted are not shown. Consumers' non-money liabilities include existing secured and unsecured loans